OPEC-Russia Deal Could Extend Until H1 2019

Gazprom Neft—the Russian oil company that has publicly expressed frustration with the OPEC-Russian deal to curtail oil supply—does not rule out that the joint cooperation pact could last until the first half of 2019.

Gazprom Neft is basing its planning on that assumption, Sergey Vakulenko, head of strategic planning at the oil producing arm of Russia’s gas giant Gazprom, told Reuters on Thursday.

Before the extension of the production cut pact in November last year, Gazprom Neft had been hinting that it was not happy with the deal as it had to sacrifice production growth plans as Russia and OPEC restrict oil supply to draw down the global overhang.

In October 2017, a month before OPEC and allies decided to extend the deal to the end of 2018, Gazprom Neft’s first deputy CEO Vadim Yakovlev said in an interview with Reuters—also published on the corporate website—that the company sees the OPEC deal as short term. Gazprom Neft is holding its nose at the deal as it is forcing the firm to scale back production growth plans, Yakovlev said.

Months before that, in June 2017, Gazprom Neft CEO Alexander Dyukov had said in another interview published on Gazprom Neft’s website:

“Gazprom Neft, as you know, has, in recent years, aggressively expanded production — by seven to nine percent per year — and, of course, we had planned to continue growing at that same rapid pace. Following the OPEC agreement, instead of growing at eight to nine percent, we have increased production by just 4.5 to five percent. Which is, without a doubt, a negative factor for us.” Related: India To Boost Oil Refining Capacity By 77%

Gazprom Neft’s oil and gas production increased by 4.1 percent year-on-year in 2017, the company said earlier this week, reporting growth in net profit as well.

As for the OPEC-Russia deal extending until the first half of 2019, the Saudi and Russian energy ministers, Khalid al-Falih and Alexander Novak, reaffirmed last month their commitment to the pact until 2018, and even hinted at some kind of cooperation beyond 2018.

But as oil prices hit three-year highs in January, speculation grew that the deal might end earlier, and several banks said they expected a gradual phase-out from the cuts in the second half this year.